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Top executives' pay has jumped to an average of more than $1 million for the first time after a year of bumper pay rises.
A Business Herald investigation has found that the chief executives of the 44 largest companies that disclosed their pay enjoyed an average pay increase of 23 per cent last year.
The earnings boost, which follows a similar increase in 2004, is closing the gap with counterparts in Australia, according to some.
For others it is symptomatic of a management culture that rewards itself but not the workers.
Only two women made the list but both vied for the title of top earner.
Westpac's New Zealand chief executive, Ann Sherry, took home the most money with $3,117,395, followed by Telecom boss Theresa Gattung who earned $2,905,000 in 2005.
An employee at dairy company Fonterra - probably chief executive Andrew Ferrier - was the country's third best paid executive with a salary band of between $2,580,001 and $2,590,000.
This represented a 52 per cent increase on the previous year's best paid Fonterra employee, although it should be noted that if this were Ferrier he took up his post part-way through that financial year.
Fonterra would not comment on individual salary packages.
Some 13 chief executives out of 44 of the country's biggest companies and state-owned enterprises for which 2005 data was available managed to earn more than $1 million.
The average chief executive pay rise didn't come as much of a surprise to Jarrod Moyle, senior remuneration consultant at specialist human resource consulting firm Sheffield.
"We've seen some significant increases in those top-tier companies," Moyle said. "I think partly that is driven by competition and comparability with Australia ... moving remuneration packages to be more in line with Australian executives of the same sized companies."
For larger firms the gap with comparable Australian chief executives had become more marginal, he said, but bosses of small to medium organisations still lagged behind.
The latest rises are sure to raise eyebrows among workers, however, after Statistics New Zealand reported last week that average earnings including overtime increased by only 3.1 per cent last year, to $794.83 a week.
This would equate to an average salary of $41,331 a year.
The 2005 average pay of the top bosses was nearly 25 times larger at $1,018,103.
Ross Wilson, president of the Council of Trade Unions also wasn't surprised.
"I suppose what it reflects is good financial results," he said.
It was important to reward chief executives for good company performance, Wilson added, but questioned why more significant pay rises had not flowed through to other employees during the economic boom.
"We do have this hypocrisy of chief executives awarding themselves appropriate increases, probably, but not being prepared to do the same for the staff of the company."
Having increased its prices by about 30 per cent during the past two years power company Meridian Energy awarded one employee a pay rise that would make a lottery winner's mouth water. The company also paid other staff Christmas bonuses totalling $3 million.
The company's 2005 annual report said that one employee - probably chief executive Keith Turner - earned between $1,710,000 and $1,719,999.
The year before one employee earned between $780,000 and $789,999, which, if it is the same person, was a whopping 118 per cent pay rise.
The reward, which included a retention payment of $811,082 covering three years, saw the employee join a very exclusive Kiwi club - the million dollar bosses.
A Meridian spokesman said the company did not comment on individuals' salaries "other than to say that we compete in an international marketplace for all our senior people".
"Meridian recognises that if you want to attract and retain those sorts of people you have to respond to that international competition," the spokesman added.
In contrast to some healthy double digit rises there were some bosses who saw their pay heading in the wrong direction, including David Houldsworth, managing director of Hellaby Holdings, who took a 33 per cent pay cut to $632,000.
A large "at risk" salary component had fallen because the company's earnings per share had increased by a lesser amount than the previous year, Houldsworth said.
Despite the pay drop he was happy to have a strong performance-linked pay packet.
"I think it's appropriate that chief executives' salary should be very highly linked to company performance," he said. "I think it's absolutely the way it should be."
However, remuneration specialist Jarrod Moyle said the incidence of performance-based pay was much lower than in other countries.
Many company boards had become disillusioned with performance-related pay.
"It's considered too hard, it's too prone to bad publicity, it's too difficult to implement or maintain and therefore it's just been tossed aside as being too difficult to effectively put in place," Moyle said.
Kevin McBride, managing director of human resources firm McBride HR, said the number of people getting performance-related pay was roughly the same but for the first time in five or six years there had been a reduction in the level of payments.
It remained to be seen whether this was a trend or merely an anomaly, he added.
About 15 per cent of local executives' pay packets was based on performance, compared with up to 30 per cent in Australia, 50 per cent in the UK, "and it's not unknown in the States for it to be 100 per cent".
New Zealand was a relatively small economy that had to live within its means, McBride said, "but we've got to sharpen our focus on performance and be prepared to pay more but for demonstrably better performance".
Less use of performance pay could limit the ability of companies to reward outstanding executive contributions, he added. Greater use of incentive rewards must, however, be accompanied by a closer scrutiny of performance towards agreed objectives.
Bruce Sheppard, Shareholders Association chairman, would be happy to see more performance-related pay.
However, he said this would require a shift away from a culture of envy that frowned on success - the tall poppy syndrome.
"What you should be doing is saying, 'You get paid $200,000 or $300,000 which is your coming-to-work money ... but if you want to get rich, [then] we have to get rich and we don't care if you get seriously rich'," Sheppard said. "But how do you think the New Zealand public would react to a chief executive of a public company earning $200 million in a year?"
Disclosure of pay packet components had improved but was still generally not detailed enough to draw meaningful correlations between corporate performance and executive pay, he said.
Sheppard would like New Zealand companies to adopt a more Australian approach, with detailed disclosure on the earnings of their top five paid employees.
"It would be good if they did it voluntarily, and in advance of having to, but business is what it is [and] it only does what it has to do."
Fourteen companies in the Business Herald investigation did not directly disclose the chief executive's pay but rather produced lists in their annual reports that showed the number of employees within various pay brackets. Some other companies, including the country's property trusts, did not disclose pay at all.
Many companies grouped together pay components including basic salary, performance bonuses, share options and other benefits.
These complexities require the outside observer to apply a degree of interpretation and judgment when deciding what may constitute executive pay.
Transparency was the key, Sheppard said, and some companies including Telecom were leading the way.
"We want to know what you are paid and why [and] we want to see that it is correlated with shareholder value," he said.
The Shareholders Association has previously issued a discussion document on executive pay practices, summarised feedback from a range of parties including company chairmen and academics, held a meeting to discuss the issue and sent a report to regulators.
"I don't know if there's much more we can do."
A fall in performance pay could reflect a tightening of the economy and a reluctance among some executives to have significant parts of their salary vulnerable to a downturn, Sheppard said.
This fear would be needless so long as targets were reviewed and kept realistic in light of wider economic determinants.
A fall in the use of share options had benefited shareholders because executives rarely converted them into ownership, options diluted stock value and companies did not get a tax break from their issue, he said.
For the year ahead, however, it was likely to be more of the same.
"Nothing much is going to change until there's a fundamental [and] serious debate on our economic welfare as a nation and individually, and until we actually start to respect business and economic success rather than try and get a lawnmower in to cut them down."
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For a graphic showing what NZ's executives earn, click on 'more pictures' at the top of this page.
Notes to the graphic: This data is sourced from annual reports. Some chief executives on this list may have since left their jobs. Currency conversion rates: 1A$ = 1.2NZ$, 1GBP = 2.86NZ$, 1S$ = 1.01NZ$. Percentage change of 23 per cent was calculated on records where data was available for both 2004 and 2005. Some data based on the declared earnings of one unspecified employee. Where earnings were declared in a band the upper limit was used. Unless specifically declared the top paid employee was assumed to be the chief executive. Some data may contain information related to redundancy payments. The information presented was drawn from company annual reports for 2004 and 2005. Remuneration data is based on obvious declared earnings including base, bonus, performance and relevant share options.